TSMC’s Latest Production Technology Has Yield Issues - Company.

Taiwan Semiconductor Manufacturing Company, the world’s largest contract maker of semiconductors, said during a conference call with financial analysts that it “difficulties” with yields with its latest 40nm process technology. Yield issues may slowdown adoption of the fabrication process by customers and hence, revenue ramp of TSMC.

”There have been difficulties with the yields. 40-nm is a difficult technology to manufacturer. We understand the root of the problem,” said Rick Tsai, president and chief executive officer of TSMC, reports EETimes web-site.

Although in Q1 2009 revenue share of 40nm chips accounted for 1% of TSMC’s revenue, but already in Q2 the share of technology is expected to reach 2%.

At present only ATI, graphics products group of Advanced Micro Devices, commercially ships 40nm chips for notebooks and desktops. In case issues with yields are serious, the company may miss its shipments or cost targets, which will negatively affect both revenues and market share. Nvidia Corp., another leading supplier of graphics chips, is projected to adopt 40nm fabrication process in Q2.

TSMC announced consolidated revenue of NT$39.5 billion ($1.19 billion), net income of NT$1.56 billion ($47 million), and diluted earnings per share of NT$0.06 (US$0.01 per ADS unit) for the first quarter ended March 31, 2009.

Year-over-year, first quarter revenue decreased 54.8% while net income and diluted EPS decreased 94.5% and 94.4%, respectively. Compared to fourth quarter of 2008, first quarter results represent a 38.8% decrease in revenue, and a decrease of 87.5% in net income and in diluted